China Quickie - The 2 Sensations

The market is missing something

The 2 Sessions are currently under way in China (mentioned in “Week Ahead & Corner of the FT!”.

I flagged yesterday that Premier Li would not give as press conference (hasn’t happened in 30 years), and I took that as a warning sign not to expect much from this event.

I also warned of the risk of FOGG re-emerging (“Fear of Getting Gazpromed”) and the Communist Party did not disappoint:

They increased their military budget by 7.2% to 1.67 trillion of funny money in 2024, which incidentally is like 1/4 of the US military budget so let’s put it into perspective. The announcement also included that China will “resolutely oppose separatist activities aimed at ‘Taiwan independence’ and external interference.”

They also used the language “unswervingly advance the cause of national reunification”, which is different from “peaceful reunification” that was used in other reports.

That’s a powerful statement that will definitely induce some FOGG overhang.

I think the Chinese stock market now has a floor (HSI 15,000 is the “safe word”) and a ceiling (FOGG). My guess would be that the CCP is selling puts at 15,000 and selling calls at 18,000, so the best way to survive this trade is either:

a) Ignore it

b) Range-trade it

c) Sell Covered Calls until you get FOGG-ed

Besides FOGG, something else caught my attention that may be missed by the markets: